Back in the early 1990’s one of the big financiers printed a poster that all of us put up in our real estate agency windows, a picture of an old, greying man in a rocking chair, cobwebs strung from his legs. The caption read: “This is the young man who waited for home prices to come down.”

In Brisbane’s inner-city right now we’re hearing a common theme that’s doing the rounds of weekend barbecue chat: “If you wait for all those new apartments to be completed, prices will be much cheaper”. There is a big supply coming online, especially in some key locations. And we make no claim to be property economists. Or soothsayers or tea-leaf readers. But here’s some of what we’re seeing as agents who spend every working day in Brisbane’s inner-city residential property.

1. Few of the current and would-be sellers of these apartments have a gun at their heads:
Developers have mostly sold out the new ones. And for prices of second hand apartments to fall by a sizable margin many of our clients will need to crystalise a loss. A lot of them are investors who borrowed their full purchase price plus costs, so in many cases if they had to sell at even 5% less than current prices they will actually need to find cash from somewhere to pay back the bank. Unless they have a very, very good reason to do so, these owners will simply hold on. Wait for the next rise in prices. As they do in the dip of every property cycle.

2. The demand for inner-Brisbane living is growing by the day:
We understand how newsworthy it can be to focus on the huge supply of new apartments being built. Armageddon is apparently nigh. But rarely do we hear about the trend that our sales and property management teams witness every day. The thousands – and it is thousands – of people moving in from the ‘burbs every year. It’s not just easier commuting, but the smorgasbord of lifestyle amenities on offer that draws the young, the old and everyone in between, including a growing number of families who now live in apartments. (Ask West End State school how they’re coping with enrolments from primary-aged kids living in apartments – it’s not a new trend.)

3. This boom in local construction isn’t really about Brisbane property:
With the huge spikes in their home prices Sydneysiders were always going to find a place to spend their new equity and they’ve simply done what they did in the early 2000’s and seen delicious value in Brisbane’s inner-city. Almost all of these new buildings have been pre-sold interstate off the back of that equity growth – yes there’s some international sales but their importance is often vastly overstated – and while these buyers won’t be pleased with the lower than expected rents they’ll actually get, it’s hard to see them dumping and running.

4. Replacement costs continue to rise:
There’s often a startled look on a property developer’s face when we show them what we have for re-sale, often in buildings just a couple of years old, and how affordable these apartments are relative to new projects. Even if land costs plummeted it’s impossible to see how a new apartment in our inner-city can be built at prices to compete with established ones. It’s one reason we’re already hearing about a huge number of pending projects being put on ice. One leading developer in the media this week: “Unless the project is currently under construction many of the earmarked projects in Brisbane’s inner-city will not go ahead.”

The brakes have already been applied so while prices have eased a little on buyers’ concerns about the size of the supply, no one is panicking. Those who bought expecting a quick profit probably won’t make it. But then real estate is rarely a star as a short-term investment. Rents have eased slightly – just 2% across Bees Nees’ rental managements over this past year – and we’d guess they will dip a bit further.

Overall though we’re very excited about the huge improvements underway in our inner-city. The wonderful new homes, new cafes and bars and boutiques and lifestyle amenities and all the things that become possible when there’s a big, big spike in population. The enormous investment and international profile of the $3billion Queen’s Wharf project. Proposals for new entertainment centres like Brisbane Live’s concept for Roma Street.

There’s been too much focus on the negatives of the construction boom in our inner-city. Wake up to yourself Brisbane – this is an incredible place to be a part of!

What about when these hastily built apartment blocks start falling apart and ever increasing maintenance costs force body corporates up. These folks who have mortgaged themselves to the hilt could well just run out of resources and be forced to sell, flooding the market.

I cannot believe the ignorance and biase in your editorial . Some 20,000 units coming on the market over the next 18 months and with rents spiralling downwards up to 25% over the past 12 months . Maybe I need to keep things simple for who ever wrote this bullshit. If you have oranges for sale and you only have 1 buyer who wants only a few oranges the price of those oranges will be no where near the prices as when 10 buyers wanted them , supply and demand is everything , no exceptions and no butts no bullshit of spruking the BS you have done. It is irresponsible and simply wrong. I will give you an example……. A unit purchased off the plan for 1,000,000 comes to completion 18 months later when prices have dropped by 25% deposit is 50 k . Bank will only lend on 80-90% of the value and this could become lower if the bank feels the risk is changing. Most people who are investing will have heavy borrowings and a good percentage will walk away from their deposit. If this happens multiple times the price will nose dive even further and the market may get scared and who knows

where it stops . Throw in the strong chance of interest rate rises when banks money is at risk and look out . 1989 interest rates went from 9% to 18% in 15 months. Let say people borrow 500,000 at 4% and interest rates rise a very minor amount to 6% . That means the repayments on that property in a falling rent market will go from ( interest only ) $20,000 to $30,000 if it went back to the average rate rise for the past 40 years it would be around 8% which therefore make that repayment 40,000 . Making this almost impossible for people with average incomes and possibly no rental return due to the high vacancy rates which would exist in an oversupplied market . The problem with real estate agents is that most have no financial training and are only concerned in selling their next ” hamburger” . You are totally compromised in giving advice on future market analysis this is wrong and even corrupt in nature. I expect it is like the tobacco companies promoting their products to children as they do in third world countries . You owe it as a good and honest person in business to present the full facts not trying to turn a sour drink of lemon juice into lemonade .

Many thanks for making the time to comment on this post Ian. We encourage debate so we’re pleased to hear your views, but would ask you refrain from swearing in a public forum. I’m sure you make a number of valid points but I’m too busy making hamburgers to reply in detail. One quick one though – according to the RTA rents in Brisbane are flat compared to one year ago for 2 bed apartments, and up 1.2% for 3 bed houses. So there has been no drop in median rents across Brisbane, nor a 25% drop as you’ve suggested. I don’t think any optimist expects rents to remain as they are but 25% seems harsh. Thanks again. Rob Honeycombe.

The arguments you put forward in support of the contention that there will be no appreciable drop in new apartment prices sound compelling. But … what about existing properties, and Federal Labor’s promise to abolish negative gearing benefits on all existing, second hand properties? What effect will this have on second hand, older properties, remembering always that, as soon as you move into that brand new, gleaming apartment, it immediately becomes second hand? Most of those commenting seem to agree that, if investors are driven away from existing properties, the pool of available buyers will shrink dramatically, and prices will drop in consequence. The argument then becomes: How big will that drop in price be, and will it be temporary or permanent? To paraphrase that famous Oriental curse, we do indeed live in interesting times!

I think your analysis above is good – there are many factors to consider. I feel that the effect of factors outside the local market such as employment in Qld and international and interstate investors and migration, will be just as significant as the factors in the local market such as migration from outer to inner suburbs.

My recollection of the last 2 big price drops: apartment prices in West end peaked around 2007-08, then dropped about 10% for 3 main reasons – they were overpriced to begin with in the hot market, the GFC and then the Jan 2011 floods. Even now in 2016, many have not yet recovered the full 10% to their prices of 2008. I recall that Bris inner city apartment prices also dropped/stagnated for several years in 90s after the 1991 recession. Oversupply of units then, such as the Admiralty towers etc.

Enjoy reading these emails , not actually sure how I got on the list.
I have been an employer in the Plumbing game for over 40 years so form my own views on the real estate movements and I do admire your honesty
You are not trying to ‘pump it up” as many do , you seem to have your finger on the pulse imo.
Keep it up!

At this moment july 2017 there are 95 two bedroom units for rent 55 1 bedroom units for rent at hamilton all offer the same some with water views some with out pools gyms same same cheaper rent seems to be the only option why would you buy in this market